The recent spike in food prices has prompted Goldman Sachs to revise upwards India’s overall inflation forecast to 6.7 per cent for the next fiscal from 6 per cent estimated earlier.

“We raise our FY12 inflation forecast to 6.7 per cent from 6 per cent previously due to recent upside surprises in agricultural prices, rising input and output price expectations and higher global commodity prices,” Goldman Sachs said in a report.

The global investment banking and securities giant added that the RBI was likely to further hike key rates by 75 basis points in 2011 (calendar year) to tame inflation.

“We continue to expect a further 75 bps in rate hikes by the Reserve Bank of India in 2011,” it added.

Inflation, especially the food price rise, has been a concern for the government and the common man for the last few months.

To fight inflation, RBI last month raised short-term lending (repo) and short-term borrowing (reverse repo) by 25 basis points each.

Food inflation jumped to 17.05 per cent during the third week of January, prompting the government to take stock of the price situation at the highest level.

The Prime Minister Dr Manmohan Singh along with senior cabinet members reviewed price situation, as food inflation soared by 1.48 percentage points for the week ended January 22, driven by high prices of vegetables, fruits, milk and eggs.

For the current fiscal, the Finance Ministry expects the overall inflation to average at 9 per cent.

In December last year, wholesale price inflation rose to 8.4 per cent from 7.5 per cent in November, due to a large spike in primary articles prices-especially vegetables.

Besides, the trend of rapid escalation in food and other primary article prices has also continued in February so far.

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